Are There Special Estate Tax Rules for Family Farms?

Harrisville family farm estate planning attorneys at Biddinger & Estelle can provide assistance if you or your loved ones own a farm that you want to try to keep in your family. Many people who own family farms want to hand their land and farming operation down to the next generation so the farm can serve as their legacy and so the farming tradition can continue. Unfortunately, estate tax can make this more difficult. But, the good news is, there are special rules that apply in order to try to protect family farms.

Special Estate Tax Rules for Family Farms

Estate taxes will be due on estates exceeding $5.6 million in 2018, if assets are passed on to anyone other than to a spouse. The estate has to pay this tax and, in some cases, if you are the owner of a farm, your land may have appreciated in value enough to trigger the tax but you may have few or no liquid assets to cover the bills that are due to the IRS. When this occurs, there may be no option but for some of your farmland to be sold in order to pay taxes.

Because land often increases in value enough to put farmers in a position where their estates trigger estate tax even though the farmer isn’t very wealthy, there are special rules in the tax code that are designed to help protect family farms. As the Washington Post explains, there are special use valuations that can apply to family farms in certain circumstances that can make it possible for more than $1 million dollars to be deducted from the value of the taxable estate.

Often, this means that the farm can escape being taxed at all or that the amount of estate tax that ends up being due upon the death of the farm owner is far lower than it might otherwise have been if not for the special use valuation.

Special use valuations do not apply in every single situation where a farm is transferred to new owners after a death. The land must continue to be farmed for at least 10 years after the death of the owner in order for the special use valuation to apply to reduce the estate tax. In addition at least one of the family members who inherited the farmland must continue to remain involved with farming, and there are restrictions on rent cash leasing.

However, when the family farm will stay in the family, special use valuations often make it possible for the heirs or beneficiaries who inherit the farmland to be able to keep the farm in the family rather than having to sell some of the farmland simply in order to pay a large estate tax bill.

You should talk with Harrisville family farm estate planning attorneys in order to find out if your family farm may be subject to estate tax, and to find out both if the special use valuation could apply to your situation and if this special rule is going to do enough to protect your farm or if there are other legal tools that you should use to try to preserve the land as a legacy for your loved ones and for future generations.

Getting Help from Harrisville Family Farm Estate Planning Attorneys

For residents of Michigan’s shoreline communities, protecting farmland and other valuable family assets is very important. This is why so many Michigan residents turn to Biddinger & Estelle to get legal help with the estate planning process. our Harrisville family farm estate planning attorneys can work closely with you to determine if estate tax will be owed on your estate.

If taxes will be due, our legal team can assist you with aiming to reduce the amount of tax that must be paid or to avoid having to pay estate tax altogether through the use of appropriate legal tools and gifting processes. To find out more about how our legal team can assist you in protecting your farm from estate tax, give us a call at (989) 872-5601 or contact us online today.

Michelle grew up in the State of Michigan. After law school, she returned to the Thumb area where she has been practicing law since 1986. Michelle graduated from Caro High School in 1978. She received her degree in economics from the University of Michigan in 1982. She graduated from the University of South Carolina School of Law in 1986. She is a member of the State Bar of Michigan and the American Academy of Estate Planning Attorneys. Michelle, her husband Greg, and their golden retriever Bailey reside in Cass City.

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